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It is difficult to advocate for a particular method of teaching children about money because, I would say, a good many parents don't know about it themselves. Rather they know and believe different and incompatible things. Therefore any idea would get some people complaining that it's exactly the wrong lesson. I'll start by dividing the people into groups:

Some view money as ever-scarce, hoarded by lucky, stingy SOBs who pay triffles for long and inconvenient hours. Others view money as the result of work: They'll have enough as long as they work diligently, save for big purchases, and live within their means. Still others view money as abundant, spraying everywhere if the right ideas and resources can be brought together. Some people love the security of a job, others believe that a job is inherently insecure and would rather be self-employed. Some people think you need to work to make money, others think you need money to make money, and still others think it takes other people's money and other people's labour to make a real profit.

Whatever you believe, this is as much as you can teach your children. I am an entrepreneurial person and have fortune-500 experience so I know quite a bit about how money works, but I'm no Donald Trump and can't advise my children on how to make billion dollar deals, although I hope to someday soon. My main focus right now is to teach them how to turn effort plus an opportunity into money; how to recognize value and capture a piece. I definitely don't want to start with teaching them how to simply put in some time or do a "job" in exchange for a wage.

I struggled to find a way to get them into some money, without using the basic yet inherently flawed method of paying them an allowance or payment for chores (payment has been proven in numerous studies to be a demotivator and I don't want my children saying they won't help with the housework unless they're paid). I realized that we had quite a bit of money in our old milk jugs, juice containers, and bottles, each of which get up to 25 cents in refund from the bottle depot. If the children were interested, they could round up those jugs and sell them. After I explained the opportunity I was thrilled to find out that they were indeed interested.

A few weeks ago we went for the first time and the kids got seven dollars. With that seven dollars we went garage sale hunting and the kids were able to get themselves a couple of toys and a cool lamp. It was awesome. That one time was all it really took. The kids rounded up the bottles on their own this week into a box in the garage. They don't really understand their business yet, but they are still very young (7 years and 5 years). It won't be long before they know how much the different bottles are worth. I'll milk this idea until they start taking a lot of interest in prowling around the bus stops and trash cans to find other people's bottles and cans.

The bottle picking business is a perfect, and moderately complex real-life business. Here are some business and money-making concepts the children can learn:

1) It's a bit like fishing, mining or forestry -- The children have a resource in the bottles that they can harvest and deliver to a market. When the bottles are gone they have to wait until more bottles are created. It's a real type of business that the parent can draw parallels to.

2) Children can reconcile a complicated transcation -- At the bottle depot there is a fairly complicated transaction. Much more complicated than a lemonade stand for example. Bottles are classified into many types, each of which carries a different payment. The children should monitor that the depot worker counts and values the bottles correctly.

3) Children can learn to forecast -- If they know how much each type of bottle is worth then they should be able to calculate how much the load will yield.

4) Children can learn to optimize -- There is no point going to the depot with just one bottle. The children can develop a feel for how much is a "good" load and when it's worth it to make the trip.

5) Children are incented to think creatively -- Even though I will stop them from doing it, at some point they will spontaneously realize that a can lying on the ground is worth five cents. Step 2 is they realize that if our house is worth $7 every couple of weeks, so is every house. I long for the day they ask me to drive them around the neighbourhood, or better yet, ask me to help build them a super-wagon to druck bottles away from other people's garbage. Again, I will redirect them to a different business idea at that time, but it will be a wonderful day when they ask.

6) The rewards are perfect -- If the kids don't box up the bottles and ask to be taken to the depot then they don't get money. It's perfect. No arguing about allowance, how much money to pay for how much chore. They know exactly the value of their efforts and they can decide how best to conduct themselves.

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Comments

I really like this idea! We have had a lot of success teaching our kids how to manage money using an "allowance", but not as much success teaching them how to earn money. Our allowances are equal to half their age in dollars each week. For example, my 14 year old gets seven bucks. He is required to put one into savings and give one to church, then can keep five for incidentals during the week. Things like a bag of chips from the concession stand at a game or a pack of gum at the store qualify as incidentals. We don't tie the allowance to chores, rather it is just their allocation of money for the week that they can save or spend. They do have chores and the increased allowance by age does recognize that we expect more from them as they are older, but it is just a general expectation.

We've done a few entrepreneurial projects like lemonade stands, and some pay-for-performance projects like painting, but they always seem to fall flat. The bottle idea or a variation is definitely one we'll try. Thanks!

Real operating businesses, just like in real life, are complicated and could be tough to make happen. Just because there is lemonade doesn't mean that people will buy, and that they will buy for a profit. The harvesting operations are a little simpler because the buyer and price of the commodity are known, so the business problem is simply whether the child can harvest at an effort that makes it worthwhile.

I think that most parents do a half a lemonade business. As in they make the investment for free in the ingedients while the kids put in labour to make the sign and sit in the chairs. Effectively they've made it a "fake" business. Every lemonade stand I ever went to had the parent pretty much taking the money or closely directing the kid "Say thank you. Count the money. Give back X in change." My dad once bought a bunch of kitchen gadgets and he rented a booth at a flea market and tried to hawk them. It was me and my dad trying to sell. I was elementary school age. Wholly cow was it hard. I didn't know what to say,

Another easy to understand one is investing, but kids don't usually have any money :)

Love it! Enterpreunership taught at an early age is a wonderful idea. The idea of bottle collecting is great one for all the reasons you mention and is also a wonderful way to teach our kids about the importance of recycling. I would love to see schools strengthen the skills needed for self-employment. I recently decided to leave the corporate world to start my own business and what a learning experience it has been and continues to be! Doing projects such as the one you describe build confidence, business savvy, and self-reliance.

Congrats on starting your own business. I checked out your site, much more complicated than bottle picking :). I did Junior Achievement as a child, but even that didn't really crystalize the message. Again, it was too structured. It was like a directed clone or template business that didn't emphasize creativity. Anyway, I agree on some level with you for the school's teaching entrepreneurship, but I also believe that some people do not want to be entrepreneurs. Some people just want to work and forget. There is a certain tranquility in that kind of job. But you're right, some are missed who might benefit.

I did not receive your RSS feed, but like I said, I am interested about what you can teach about bringing up kids.

My childhood did not have any lessons on financial literacy. My parents were too broke and addicted to gambling to teach us any good things about money. It is not surprising that I went that way as well. Not that I am gambling, but I did not for a long time knew how to handle money well. I would say that now, I value money and at least know how to make money work for me.

One of my main goals now is to teach what I did not learnt from my parents and schools to my children. They are not old enough yet to do the entrepreneur stuff your kids are doing now. I am just at the stage of getting them to put coins into their piggy banks. They are quite thrilled to do it and always look forward to the deed when I show up with loose chains.

Recently, their piggy bank was full. So I had fun with them spread all their coins out on the table and getting them to start piling the coins into heaps of money. They were quite intrigued. After depositing their money into their savings account, I realize they have more savings then me and my wife combined. Hahaha. I guess their financial journey has begun.

My current task is instilling into them good money messages that speaks of abundance. I preach Jim Rohn's philosophy to them: Profits are better than wages. My girl can repeat that phase when I ask her to now. My younger boy, is following fast. My main point for for them to view money as something abundant. That it will come to them as they seek ways to expressed their passions. I believe that their creativity will one day see them on the route to financial freedom. I am on that journey too.

Commenter supreme Jimmy, thank you! I read your blog and I am sure that you will be successful in teaching yourself and your children what you didn't learn from your parents. I wrote a post called I've Thrown Every Parenting Technique In The Book At Them: Why Won't They Learn?!?! which talks about parents not being able to teach what they aren't, and that kids will either become their parents, or become the opposite of their parents. In the area of money it sounds like you are now rebelling against what your parents accidentally or purposely taught you. You saw the problems with it probably by noticing and realizing how your parents actions affected the family and you wanted to go the other way but had no roadmap at the time.

Now on to your children. The problem with teaching them abundance if you can't model it is that the children will notice the inconsistency. So, although you teach them to save on the one hand, you also mention that there is not enough income for the parents to save. It is like saying "left is the better path" but then going right -- I'm not saying you purposely choose not to save, but you know what I mean. What you do have is the enthusiasm and the creativity yourself to try to catch that abundant money that's out there for you. Just a suggestion, in addition to marvelling at the accumulation of coins and deposits, maybe you might think of a way to involve the kids in fascimilies of the exciting stuff you're working on even in whatever ways they can participate. Maybe they can suggest topics for blog entries or provide a photo for you to use in the blog, something like that. I'm just brainstorming off the top of my head. Bottom line, saving is not what you're trying to do for yourself, so telling the kids to save is not walking the walk.

Anyway, they're very young yet so plenty of time. You'll be a millionaire by the time they really start getting interested in money! Thank you for the comment.

"Some view money as scarce ... others as a result of work ... others as abundant." My life changed dramatically when I switched from viewing money as scarce to money as abundant. In my opinion, if you believe in abundance you will find abundance.

Belief is definitely key. I don't know that it always works in the positive way (I may believe I can fly by flapping my wings, but that won't happen anyway) however it surely works in the negative (if I don't believe it then it will never happen). Money IS abundant, we just have to look the right way. Thanks for the comment!

I completely agree with the previous comments - we need to teach our kids about being entrepreneurial (plus I love the added environmental bonus!). I just can't see the work force being the same as it used to be moving forward. There will be less and less salaried jobs with less benefits. Quality of life comes with freedom and choices...who wants to spend 60 hours a week working and never spending time with their families? Ran across this awesome article earlier today... http://www.entrepreneur.com/article/220436 definitely inspiring!

Great link! I always find it amazing how some people and companies just reproduce what they know, like stroking a golden goose, to predictably create a fortune. This guys knows Internet advertise and he just builds a business, sells it, builds another one, sells it, repeat. Wonderful. It was the same with the huge company I worked for. They just seemed to think about a new market they weren't in, develop a little plan, and BAM! they bust in and make it work. Same as in the oil city I work in now. There are formulas for creating millions that are repeated over and over. What you need is #1 the formula, some resources which are usually a network of people, and some basic skills. I gotta get me some 'o that!

The trouble around financial matters always exist in wrong thinking. You are doing an admirable job in instiling an attitude of value and prosperity. I love , love how your children not only enjoy earning, but then have a ball spending it! Living less than wonderfully rich never represents our original nature. Folks who get a sense of their unlimitedness, have fun with money. Folks who don’t, manage to struggle with money.

Yeah, I don't like the saving. I know that a lot of the financial advisors advocate saving, but to me that's only one option. I prefer investing and it's served me well and others even better, but then I don't really relish the concept of working my whole life. Saving makes perfect sense for the life plan of working for 40 years then retiring for 20 or 30 years. I'm definitely pretty frugal and divert my income into "savings", but I don't save the savings, I put them into projects. I do know some people advocate "living rich", but that is surprising unless one has resources. I feel that I must not be understanding the term "living rich" -- let me know and in the meantime I'll check out your site .. looks inspiring! Thanks for the great comment.

When I was young, I loved to collect bottles and return them for profit. At football games in our small town, this was encouraged. Kids of 8 to 10 years old were sent out to collect bottles and return them to the concession stand for profit. The area was kept clean with little janitorial effort and the kids started their own businesses. Pretty sweet deal!